Personal pensions are pensions that you arrange yourself. They’re sometimes known as defined contribution or ‘money purchase’ pensions. You’ll usually get a pension that’s based on how much was paid in.
Some employers offer personal pensions as workplace pensions.
The money you pay into a personal pension is put into investments (such as shares) by the pension provider. The money you’ll get from a personal pension usually depends on:
- how much has been paid in
- how the fund’s investments have performed - they can go up or down
- how you decide to take your money
Types of personal pension
There are different types of personal pension. They include:
- stakeholder pensions - these must meet specific government requirements, for example limits on charges
- self-invested personal pensions (SIPPs) - these allow you to control the specific investments that make up your pension fund
Paying into a personal pension
You can either make regular or individual lump sum payments to a pension provider. They will send you annual statements, telling you how much your fund is worth.
You usually get tax relief on money you pay into a pension. Check with your provider that your pension scheme is registered with HM Revenue and Customs (HMRC) - if it’s not registered, you won’t get tax relief.